Naspers’ exec pay policies probed

‘I believe institutions such as asset managers, that handle bulk shareholdings, have a duty to act responsibly’. AS IF TENCENT’S RESULTS ARE OF THEIR MAKING

Earlier this year, Tencent’s market value was reported to be 10th-largest in the world. A number of Naspers shareholders and commentators have remarked on how Tencent is crowding out the rest of the group in the financial value sense. The Naspers trading profit (after tax), excluding equity-accounted investments, dropped from $298 million in the 2015 financial year, to $179 million in 2016. In the 2017 financial year, it turned into a $214 million loss. This seems to indicate the rest of the group adds no value. First, I calculate that Naspers’ market cap represents a discount to Tencent of about R435 billion. Naspers dishes out shares to participants of its share incentive scheme at its “discount” value.

Second, Naspers execs are seemingly receiving bonuses as though the Tencent results are of their making: the portions of their bonuses linked to group financial results are positioned at maximum level.

Note, the Naspers remuneration policy doesn’t spell out a clear key performance indicator. No targets are given. This may make the idea of a remuneration policy vote a bit of a farce.

I don’t buy the argument that this management team is generating the Tencent profits. Naspers shareholders are being asked to agree to change the conditions linked to the vesting of share awards. It is stated that this change – a relaxation in the period for awards to vest in recipients’ hands fully – is to bring the schemes in line with “market standards”. The five-year period is to change to four years and one-quarter of the award will vest per year. Ouch. Five years is hardly long-term. Chairperson Koos Bekker threatened to have me removed from the AGM last year, apparently unhappy with my remonstrations. I was trying to get access to the Naspers restricted share plan trust deed. I went the legal route and eventually its legal representatives, Webber Wentzel, confirmed I could get access; although its “client did not agree that [I was] entitled” to see the documentation. This despite Naspers being “committed to the principles of transparency and accountability to its shareholders”.

The company’s memorandum of incorporation had a clause empowering shareholders, stating they had the right to inspect “any document … made available by the company to the holders of securities in relation to each such resolution”.

Are these Naspers stories aberrations, or simply the way some companies interpret their rights? I’m a vocal supporter of being a responsible investor. I believe institutions that handle bulk shareholdings, have a duty to act responsibly.

Theo Botha is a shareholder activist and co-founder of Proxy View.